California's "Surprise Bill"

I am not a tax advisor, I am not offering any tax advice. I am always going to insist you direct all tax questions to your CPA or Attorney. I'm merely sharing this information as a homeowner, to help other homeowners understand what can be a "surprise bill" in the first year of ownership.

Often, as a REALTOR, I get calls from clients 30 days to 6 months after close of escrow asking "what is this extra tax bill?" even though they were told about it no less than 3 times during escrow...evidenced by signed disclosures.

California's Supplemental Property Taxes have been a factor in real estate since 1983. CA Homeowners are subject to them when undertaking new construction or purchasing a home. Basically this tax is a lien on your property, typically placed their by the County in the first year of ownership (or completion of new construction) and are over and above your annual property tax bill. The good news is typically the Supplemental Property Taxes  are lower than the regular taxes and are paid of in the first year.

Just like your annual tax bill, the Supplemental Property Taxes can be paid in one single payment or spread across two installment payments that usually correspond with your property tax bill. In California we receive our bill fiscally according to the following schedule:

The first installment of your tax bill is due on November 1 and becomes delinquent by the close of business on December 10. The second installment of your tax bill is due on February 1 and becomes delinquent by the close of business on April 10.

The calculation is based on a formula that considers what month the home closed or construction completed and the assessed value of the property. You may contest the valuation of your property if you feel it was calculated inaccurately.

Using this chart, here's an example:

$1,000 valuation of Supplemental Property Taxes

Change of ownership was September 15th
making the effective date October 1st.

October is .75 so the proration of this valuation you owe is $750.00

It is important to note your Supplemental Property Tax Bill
is seldom if never paid by your impound account;
meaning you must arrange payment of this bill yourself.
It is not part of your PITI: Principle Interest Taxes & Insurance -
that makes up a typical monthly mortgage payment.

I am not a tax advisor, I am not offering any tax advice. I am always going to insist you direct all tax questions to your CPA or Attorney. I'm merely sharing this information I'm aware of as a homeowner, to help other homeowners understand what can be a "surprise bill" in the first year of ownership or new construction. The graphics and some information provided above was courtesy of Ticor Title. Cover Photo by Pixabay